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      General Studies 3

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      • Important terms for Budget

      Important terms for Budget

      • Posted by Vizmins Official Post
      • Date January 30, 2021
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      Important components in Budget

      Revenue Budget

      It consists of the Revenue Expenditure and Revenue Receipts.

      • Revenue Receipts
        • Receipts which do not have a direct impact on the assets and liabilities of the government.
        • It consists of the money earned by the government through
          • Tax such as excise duty, income tax
          • Non-tax sources such as dividend income, profits, interest receipts.
      • Revenue Expenditure
        • It is the expenditure by the government which does not impact its assets or liabilities.
        • For example, this includes salaries, interest payments, pension, and administrative expenses.

      Capital Budget

       It includes the Capital Receipts and Capital Expenditure.

      • Capital Receipts
        • They indicate the receipts which lead to a decrease in assets or an increase in liabilities of the government.
        • It consists of:
          • The money earned by selling assets (or disinvestment) such as shares of public enterprises, and
          • The money received in the form of borrowings or repayment of loans by states.
      • Capital expenditure
        • It is used to create assets or to reduce liabilities.
        • It consists of:
          • The long-term investments by the government on creating assets such as roads and hospitals
          • The money given by the government in the form of loans to states or repayment of its borrowings.

      Balanced, Surplus and Deficit Budget

      • Balanced Budget
        • A government Budget is assumed to be balanced if the expected expenditure is equal to the anticipated receipts for a fiscal year.
        • Expenditure = Receipts
      • Surplus Budget
        • A Budget is said to be surplus when the expected revenues surpass the estimated expenditure for a particular business year.
        • Here, the Budget becomes surplus, when taxes imposed, are higher than the expenses.
        • Expenditure < Receipts
      • Deficit Budget
        • A Budget is in deficit if the expenditure surpasses the revenue for a designated year.
        • Expenditure > Receipts

      Different Government Deficit

      • Revenue Deficit
        • It refers to the excess of government’s revenue expenditure over revenue receipts.
        • Revenue Deficit = Revenue expenditure – Revenue receipts
        • The revenue Deficit includes only such transactions that affect the current income and expenditure of the government.
        • When the government incurs a revenue deficit, it implies that
          • The government is dis-saving
          • Government is using up the savings of the other sectors of the economy to finance a part of its consumption expenditure.
      • Fiscal Deficit
        • It is the gap between the government’s expenditure requirements and its receipts.
        • This equals the money the government needs to borrow during the year.
        • A surplus arises if receipts are more than expenditure.
        • Fiscal Deficit = Total expenditure – (Revenue receipts + Non-debt creating capital receipts).
        • It indicates the total borrowing requirements of the government from all sources.
        • From the financing side:
          • Gross fiscal deficit = Net borrowing at home + Borrowing from RBI + Borrowing from abroad
        • The gross fiscal deficit is a key variable in judging
          • the financial health of the public sector 
          •  
          • the stability of the economy.
      • Primary Deficit
        • Primary deficit equals fiscal deficit minus interest payments.
        • This indicates the gap between the government’s expenditure requirements and its receipts, (not taking into account the expenditure incurred on interest payments on loans taken during the previous years).
        • Primary deficit = Fiscal deficit – Interest payments

      Types of Budgets

      • Zero Based Budgeting
        • It is a method of budgeting in which all expenses are evaluated each time a Budget is made and expenses must be justified for each new period.
        • Zero budgeting starts from the zero base and every function of the government is analysed for its needs and cost.
        • Budget is then made based on the needs.
      • Outcome Budget
        • It analyses the progress of each ministry and department and what the respected ministry has done with its Budget outlay.
        • It measures the development outcomes of all government programs.
        • It was first introduced in the year 2005.
      • Gender Budgeting
        • It is gender-based assessment of Budgets, incorporating a gender perspective at all levels of the budgetary process. 
        • It comprises of restructuring revenues and expenditures in order to promote gender equality.
        • It is actually budgeting for gender equity.
        • Through Gender Budget, the Government declares an amount to be spent over the
          • Development, Welfare, Empowerment schemes and programmes for Females.

      Other important terms in News

      Off-budget borrowing

      • Off-budget borrowings are loans that are taken not by the Centre directly but by

        • another public institution which borrows on the directions of the central government.

      • Such borrowings are used to fulfil the government’s expenditure needs.

      • Since the liability of the loan is not formally on the Centre, the loan is not included in the national fiscal deficit.

      • This helps keep the country’s fiscal deficit within acceptable limits.

      Tag:Economy, UPSC

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